The Best States For Business 2018: North Carolina Leads The Way

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The Amazon HQ2 sweepstakes captivated site selection experts and government officials over the past 14 months. The e-commerce giant finally announced plans this month to split the grand prize, with 25,000 jobs headed to both Northern Virginia and Queens, New York. While the 20 HQ2 finalists awaited a decision, many corporate expansions and relocations were put on hold.

The logjam should start to unclog soon, with Apple the next tech titan on the clock. Apple announced plans in January for a major new campus and an additional 20,000 jobs in the U.S. over the next five years. At the time, Apple said a location decision was expected by year-end.

The Raleigh, North Carolina, metro area and its Research Triangle Park is reportedly a leading candidate for the campus (Apple didn’t respond to a request for comment). The Cupertino, California, company could do worse for a second home. North Carolina has the best business climate in the U.S. and tops Forbes’ Best States for Business ranking for the second straight year.

North Carolina’s labor, energy and tax costs are all well below the national average and rank as the second lowest in the U.S. overall, per Moody’s Analytics. The 3% corporate tax rate is the lowest in the country.

In addition to low costs, the state boasts a highly educated labor supply fueled by graduates from 53 colleges and universities, including elite schools like Duke University and the University of North Carolina. The outlook is strong as well. Job growth and gross state product growth are expected to rank among the strongest in the country over the next five years. The population is growing twice as fast as the U.S. average.

Raleigh was a finalist for Amazon’s HQ2 ahead of the final announcement, but it was fellow Tar Heel cities Charlotte and Garner that both nabbed $200 million Amazon distribution centers this year. Amazon promises to hire at least 1,500 workers at each of the state-of-the-art automated facilities.

Another company that tapped North Carolina’s business-friendly climate in 2018 was AveXis. The gene therapy firm will create 200 new jobs through a manufacturing center, adding to the state’s leading biotech and life sciences sector.

“As a long-established biotechnology hub that attracts the nation’s top talent, Research Triangle Park was an optimal location to expand our footprint and complement our existing state-of-the-art manufacturing site in the Chicagoland area,” said AveXis chief technical officer Andrew Knudten when announcing the news.

International firms are landing in North Carolina too. The state landed Chinese tire maker Triangle Tyre at the end of last year for its U.S. manufacturing plant. Average annual wages for the 800 jobs will be 70% higher than the existing average in Edgecombe County. State and local incentives of up to $152 million helped grease the wheels.

Forbes has rated the business climates of the 50 states annually since 2006, with only North Carolina (twice), Utah (six times) and Virginia (five times) finishing in the top spot. The 13th version looks at 41 metrics across six main categories: business costs, regulatory environment, economic climate, growth prospects and quality of life. North Carolina was the only state to rank among the top 12 in all six categories (click here for a detailed methodology).

Utah moves up one place to finish second. Utah’s tech prowess was highlighted this month when German tech giant SAP announced a deal to purchase Provo-based cloud unicorn Qualtrics, one of the leaders of the state’s startup and tech community known as Silicon Slopes. Utah tech companies are aided by energy costs 15% below the national average, per Moody’s Analytics. The state’s employment growth is tops in the nation over the past five years, and research firm Emsi forecasts annual job gains of 2.2% through 2022, also the highest for any state.

Texas ranks third overall but scores the highest for our growth prospects category. Employment, income and economic forecasts for the Longhorn State all rate among the top four in the nation. The state is also a leader for startup activity and venture capital investment. Texas has been the No. 1 state for corporate relocations and expansions for six straight years, according to Site Selection magazine.

Rounding out the top five are Virginia and Nebraska. Virginia economic development officials are still basking in the glow of their Amazon win. The state rates first in both the quality of life and regulatory environment categories. Nebraska boasts low business costs and a business-friendly regulatory climate. The Cornhusker State's average unemployment rate of 3.2% over the last five years was the second lowest in the country.

The biggest gainers were 14th-ranked Idaho and 17th-ranked Arizona, with both states up six spots. Idaho benefitted from a stronger current economic climate. Five-year income and gross state product growth rank among the top eight. Arizona’s economy is expected to expand at the second-fastest rate in the U.S. through 2022.

North Dakota continued its descent from runner-up ranks in 2013 and 2014. At No. 23, North Dakota is down 14 spots this year. The collapse in oil prices from $109 in June 2014 to less than $30 a barrel 18 months later dinged North Dakota almost across the board, regarding its labor supply, economic climate, fiscal health and growth prospects.

After three-straight last-place finishes, West Virginia moves up one spot to 49th. The state's college attainment rate is the lowest in the country, with only 20% of its population over the age of 25 possessing a post-secondary degree. The state's legal climate also ranks among the worst when measuring business friendliness, according to the Institute for Legal Reform.

Alaska replaces West Virginia in the basement. Alaska's economy shrunk faster than any other state over the past five years (down 2.6% per year), due to the fall in energy prices. Net migration out of the state also ranks worst in the nation. Finally, the employment outlook is the worst in the country over the next five years, according to Moody's, with the state not expected to add any jobs on a net basis.